Opportunity in the Air

I enjoyed reading the article last month on hybrid air vehicles in New Scientist magazine. It seems there is growing interest in hybrid electric aircraft or, in some cases, even pure electric aircraft. For budding entrepreneurs this area presents some interesting opportunities. New Scientist cites the agility of electric car start up firms in the automotive industry, many of whom are better able to adapt to and use breakthrough power train technology and production systems. This has not really been the case in the aerospace industry partly, I think, because of how expensive and technically complex it can be to achieve EASA or FAA approval.

Now even Boeing and Airbus are dabbling with the idea of using a mix of turbine and electric power. It seems the biggest opportunity is in the small aircraft field though with Cesna planning to build an all-electric small aircraft. With the low cost of running an electric aircraft perhaps personal aviation will become more affordable?

Either way there are other companies doing impressive things in the field of aerospace innovation. One in particular is Hybrid Air Vehicles who have won a major military contract (I wont say more than they have on their website) and are busy proving that their ‘blimp’ is capable of transporting heavy loads long distances. The company has told me that costs are around 1/7 of traditional air transport. Could these ultimately replace traditional (water based) ships? I can’t imagine they can carry the huge loads so this is unlikely, but perhaps it will be a revolution in the mid sized transportation of goods.
When coupled with the rapid improvements in unmanned aerial technology (again driven by start-ups and small companies) there is some amazing scope for large pilotless air ships transporting goods over land and sea. I will be talking to a few of these start-ups over the coming months to see what they think about this combination of technologies and will report back.

Fixing the economy - nature is the missing link

A very important series of UN meetings is taking place this week in Nagoya when representatives from around the world meet to discuss how to value the natural environment. The hope is that the meeting will be able to set a target to halt biodiversity loss by 2020, though that will require, as always, money and a willingness to support the developing world. The last point is especially important given the level of environmental destruction in the developing world.

By placing no value on 'nature' at the moment we have created a massive market distortion that fuels unsustainable economic growth and prevents innovators from commercialising great ideas. If we as consumers and the businesses that we buy from do not need to pay the true cost of the resources and economic destruction we cause then how can the market be efficient and how can we make reasonable economic decisions? This is an example of the type of distortion that allows outdated business and industries to stay in business. Far from supporting the creative destruction on which capitalism thrives it is destructive and stupid.

Since we now understand that there is an economic and social cost to losses in the natural environment it is a worthy exercise to value these resources so that communities, companies and governments can better manage their use. It will also help us, as communities and individuals, to understand the true cost/benefit ratio of a business and industry to our region and the world.

It also seems logical to update the 'economic rules' by which capitalism is governed from time to time. We are doing exactly this in the wake of the recent banking crisis and here's hoping we do the same thing now we understand and accept how critical the natural world is to humanity.

Google Changes the Economics of Offshore Energy

Google has announced a huge investment in energy infrastructure off the East coast of the USA with US$5 billion to be put towards an offshore energy transmission line. It will be situated approximately 10 miles off the coast, will be 350 miles long and could provide power to approximately 1.9 million homes.

This could change the economics for wind power in the United States, particularly on the East coast. Grid connection is one of the biggest costs and most complex issues for wind farms, even on land, so for investors in wind energy it will make the business planning and financing of projects much easier.

It is interesting to see that Google thinks the project will provide a strong financial return (that may not mean profit). Perhaps this represents a viable way to develop this type of basic infrastructure - someone invests in the underlying infrastructure and then sells access to other investors.

It will be especially exciting if this project is able to be used in the same way as the highway system where the basic idea is to move people, the products used to move those people can (within certain parameters) be anything. That would enable innovators and engineers to come up with new ways of generating energy provided it is compatible with the infrastructure.

The Green Army

Another big story this month is the news that the US Military has decided to turn to renewables in its constant quest for a new battlefield edge. Though it could also be due to a new found love of the environment I suspect the reasons are primarily tactical and perhaps financial. The House reports that Pentagon Officials have advised the House Appropriations Defense Subcommittee that by the time a gallon of fuel reaches Afghanistan it costs the military approximately $400. That cost does not include the human costs associated with moving large volumes of fuel into the heart of a landlocked nation.

Anything that saves the lives of soldiers is a good thing in my book but this will also result in a large new market for renewable energy technology. The military is probably (I have no stats to back this up) one of the largest buyers of advanced manufactured goods in almost every industrialised country. A shift towards buying advanced ruggedised products will change the economics of many products and companies. When the Military buys things it usually buys big, especially when it comes to energy. The New York Times reports that the Secretary to the Navy wants 50% of the energy for the Marines and Navy to come from renewable sources by 2020. The first items that are reportedly being tested by 150 Marines include solar panels, energy conserving lights and solar shields that provide power and shade.

This is on top of the incorporation of hybrid technology in Naval ships with the commissioning of the USS Makin Island which runs on electric power at low speeds.

The big 'What if?' in the room

I said I would talk a little more about ARPA-E and though I have been reading about its projects with interest it is hard to know where to start. Perhaps that is a positive, it is one of the broadest programs I have seen with funding for potential breakthrough technology in areas ranging from new grid design to carbon capture technology for power plants. The thing I like about this program is that it is seeking to fund revolutionary technology, the type of technology that will probably amount to nothing but could ... change the world.

I think this is just the type of program that government's in my home country (Australia) and my adopted country (UK) would be unlikely to fund. Certainly not on a comparable scale (even relative to their economies), despite the reinvigoration of conservative politics over the last 12 months there are still few (if any) countries on Earth with the appetite for risky innovation as America.

Here's hoping it works!

Oh and check this map out, it gives a great overview of the geographic spread of programs and highlightsthe continued strength of California in US innovation.

The US Government Funds Cutting Edge Research

Though it has been a while since my last post this is not due to a lack of enthusiasm and interest in the opportunity that is climate change. Far from it. I have had a fantastic holiday and then witnessed first hand some of the creativity and ingenuity that humanity will have to show to solve and ultimately benefit from the problems we have created for ourselves. My job took me, in mid July, to the Farnborough International Airshow; not a centre of environmental innovation?

Perhaps.

But it is a centre of human ingenuity. As I watched the F22 hovering in mid air, performing maneuvers even its most recent cousins couldn't dream of I marveled at the genius of humanity. We certainly produce some spectacular things when we turn our mind to war and I know (or at least hope) this same type of genius is turning its attention to technology that will benefit and ultimately save humanity. These are the people working on disruptive technologies in companies we have probably never heard of.

This type of research has always (and probably always will be) a long way behind the funding provided to military research but as the world wakes up to the issue of climate change more funding will be spent in smarter ways. I was particularly impressed to read that the US government is funding ARPA-E, a programs very similar to DARPA's research into speculative military technology. The idea is to fund low 'probability' high 'benefit' research into technology.

I will look more closely at this program in the next few days but think there could be some truly revolutionary outcomes from this approach. It is certainly one of the most exciting funding developments in the energy field for a long time.

A Shared Opportunity: Wind Energy and Aerospace

I recently had a number of interesting discussions with government trade and investment organisations where the interaction between composite technology in the aerospace sector and the requirements of the renewable energy sector were raised. It seems there are emerging opportunities in the renewable sector for companies that have developed capabilities in the design and construction of composite materials for the aerospace sector.

The next generation of wind turbines is looking like it will be even larger than the last, especially those being installed offshore. This means that the current system for building this turbines (similar to that for boats and cars) will need to be improved. The current processes can leave small imperfections in the blades which can lead to early failure with some reports suggesting up to 80% of blade failure can be attributed to poor production standards. Given the work that has gone into composite production both for the F-35 (Joint Strike Fighter) and the Boeing 787 Dreamliner it is unsurprising that opportunities for cross pollination exist. What is surprising is that very few aerospace companies realise this opportunity exists, I also wouldn't mind betting that the Wind Power sector does not know the Aerospace sector has been working on these design/production issues for years.

Perhaps this is a situation where support from government, industry associations and research institutions could save the Wind Power sector from 'reinventing the wheel' and could increase business for some Aerospace companies.

Would be interesting to know how many other opportunities like this exist in other sectors.

Is this the breakthrough in distributed power?

Photo: Bloom Boxes at ebay (from www.bloomenergy.com, 11/3/10)

Another fuel cell is launched and another round of enthusiastic investors and reporters are proclaiming the world as we know it is about to change. Bloom Energy has announced the release of its 'decade in the making' fuel cell the Bloom Box. It is easy to dismiss this as another hype filled company that will fail to deliver on its promise; but sooner or later someone really will revolutionise the way we generate energy.

Is this it? It is hard to say, but there are a few things that make Bloom Energy extremely interesting. Firstly, Gen. Colin Powell (Ret) is one of two independent board members. Secondly there seems to have been interest from a number of leading companies including Google, Walmart, Bank of America, Coke, FedEx and ebay with FedEx predicting a payback period of 5 years (the others do not provide a prediction though Bloom Energy predicts 3-6 years).

The third, and perhaps most interesting, is that the Bloom Box is a solid oxide fuel cell rather than the more expensive and more common (in commercial applications) Proton Exchange fuel cell. Solid Oxide fuel cells can operate using a variety of different fuels, do not need to use an expensive Platinum catalyst and are extremely efficient even by fuel cell standards but traditionally operate at a high temperature (600C +). As you can imagine these high temperatures add to the costs associated with design and production. Bloom claim to have solved this problem though there is not much detail on how.

In a marketing and sales sense Bloom Box is simple to understand: a group of fuel cells the size of a loaf of bread will power a house, the design is modular, the more you put together the more power you get out, a complete module can power 100 homes or 1 office block. This is an easy idea for the consumer and business customer to get their head around; a concept that is both easy to understand and scalable will be easier to sell in the board room. Those businesses that do install this systems will also make a clear statement to visitors, a shiny set of these boxes out the front sends a message.

So will Bloom Energy succeed? Well I think it has a better shot than most that have tried so far: it has good independent leadership at board level, is being used by leading companies who are willing to participate in case studies, it is cheaper to produce than traditional fuel cells, it is modular and easy to understand and it looks good.

Bloom has a pretty good shot at being extremely successful and changing the way energy generation is viewed; perhaps even get us used to the idea of localised energy generation. Whether Bloom Energy succeeds with the Bloom Box may be irrelevant though, especially if it opens the market for other 'distributed power generation' entrepreneurs.

An Opportunity

There are amazing opportunities out there right now. Things are happening, economies are changing, barriers to entry are being broken down in established industries. Yes, there has been a failure of government and government policies in changing the 'rules of the game' to ensure sustainability as well as opportunity are the foundation of capitalism. But things are changing anyway!

Look at the the automotive industry of the late 20th century; high barriers to entry and very limited opportunities for new car companies. In fact an entrepreneur would need to have a lot of money to loose just to start building cars let alone actually sell any of them. While consumers demanded the same basic car that Henry Ford built (with higher efficiency and more fancy bits) there was limited opportunity. Suddenly this has changed, enough consumers are demanding ultra high efficient vehicles to make companies like Tesla Motors, Think and Better Place an interesting proposition for entrepreneurs. Whether they make money is another matter, the very fact that VC sorts and entrepreneurs are even considering the automotive industry is worth entering risk tells us that the game has changed.

Why the game has changed and the people and companies that are trying to take advantage of the new opportunities this presents is what this blog is all about.